Google Maps On Apple iPhones Will Boost Ad Sales

The Apple-Google rivalry has taken many twists and turns — on maps alone.

Apple's (AAPL) move to ditch Google Maps in favor of its own has proved ill-fated in a number of ways, not the least of which is that it might steer more revenue Google 's (GOOG) way.

When Google Maps came as a default app on Apple's iPhones, it couldn't carry any ads, per Apple's policies, says Global Equities analyst Trip Chowdhry. But now that Google Maps is offered as a download from the Apple App Store, it can carry ads.

Google's Luc Vincent in June demonstrated how Google captures images in hard to reach places for its maps. View Enlarged Image

When the app was preinstalled on iPhones "from Google's perspective, that fell under a losing proposition," Chowdhry told IBD. But now, as a download, Google's "constraints are dramatically reduced."

Thus, Apple's trip into maps has been a detour in a number of ways.

Google's mapping app was kicked out of its long-held spot as the preinstalled, default mapping program on Apple's iOS software for iPhones, iPads and some iPods with the introduction of Apple's newest iOS in September. It was replaced by Apple's own maps.

Two key Apple mapping executives, Scott Forstall and Richard Williamson, left the company under pressure.

Google, though, wasn't happy about being left off such popular devices, and it soon prepared a map app that Apple approved. Google Maps was reintroduced to iOS on Dec. 13 as a downloadable app. It quickly became the App Store's No. 1 download. Apple users downloaded it 10 million times in its first two days in the store, according to a blog post by Google's Jeff Huber.

"There's obviously a base of people who want to use it," said Wedge Partners analyst Martin Pyykkonen. "The more people who open up a page and location on a map to get directions, the more opportunities you have to post ads."

Pay-Per-Action Lucrative

Mobile maps with paid advertising have the potential to make as much as, or more than, Google Maps on desktop PCs, says Chowdhry.

"The CPC (cost-per-click) rate for a click on a plumber on the Web might be 5 cents," Chowdhry said. "But the pay-per-action rate, what you'd get if you clicked 'call' on a mobile ad for the same plumber, could be $2 or $3."

In a report released Thursday in which it reiterated its overweight, or buy, rating for Google, Barclays said maps could generate $2 billion to $4.2 billion in revenue for Google by 2016. "We believe the popularity of Maps gives (Google) the opportunity to attack the local ad market in a unique way and expand its control of the ad funnel from national to local," Barclays wrote.

The Apple-Google rivalry has taken many twists and turns — on maps alone.

Apple's (AAPL) move to ditch Google Maps in favor of its own has proved ill-fated in a number of ways, not the least of which is that it might steer more revenue Google 's (GOOG) way.

When Google Maps came as a default app on Apple's iPhones, it couldn't carry any ads, per Apple's policies, says Global Equities analyst Trip Chowdhry. But now that Google Maps is offered as a download from the Apple App Store, it can carry ads.

Google's Luc Vincent in June demonstrated how Google captures images in hard to reach places for its maps. View Enlarged Image

When the app was preinstalled on iPhones "from Google's perspective, that fell under a losing proposition," Chowdhry told IBD. But now, as a download, Google's "constraints are dramatically reduced."

Thus, Apple's trip into maps has been a detour in a number of ways.

Google's mapping app was kicked out of its long-held spot as the preinstalled, default mapping program on Apple's iOS software for iPhones, iPads and some iPods with the introduction of Apple's newest iOS in September. It was replaced by Apple's own maps.

Two key Apple mapping executives, Scott Forstall and Richard Williamson, left the company under pressure.

Google, though, wasn't happy about being left off such popular devices, and it soon prepared a map app that Apple approved. Google Maps was reintroduced to iOS on Dec. 13 as a downloadable app. It quickly became the App Store's No. 1 download. Apple users downloaded it 10 million times in its first two days in the store, according to a blog post by Google's Jeff Huber.

"There's obviously a base of people who want to use it," said Wedge Partners analyst Martin Pyykkonen. "The more people who open up a page and location on a map to get directions, the more opportunities you have to post ads."

Pay-Per-Action Lucrative

Mobile maps with paid advertising have the potential to make as much as, or more than, Google Maps on desktop PCs, says Chowdhry.

"The CPC (cost-per-click) rate for a click on a plumber on the Web might be 5 cents," Chowdhry said. "But the pay-per-action rate, what you'd get if you clicked 'call' on a mobile ad for the same plumber, could be $2 or $3."

In a report released Thursday in which it reiterated its overweight, or buy, rating for Google, Barclays said maps could generate $2 billion to $4.2 billion in revenue for Google by 2016. "We believe the popularity of Maps gives (Google) the opportunity to attack the local ad market in a unique way and expand its control of the ad funnel from national to local," Barclays wrote.

Mobile ad spending is expected to soar as consumers with smartphones spend more time browsing the Web. It's "growing faster than previously expected," according to a report published Tuesday by research firm eMarketer.

U.S. mobile ad spending in 2012 jumped 180% from the year prior, to $4.06 billion, says eMarketer. That's far more than its 86.5% growth in 2011. By 2016, Mobile ads are expected to be a $20.9 billion annual business, though growth rates will slow, says eMarketer.

This year, Google's mobile ad revenue was about $2.17 billion, up 189%, according to eMarketer. Google doesn't break out its revenue by source, and it declined to comment for this story. In 2013, Google's mobile ad revenue is seen jumping 84%, says eMarketer.

Some of that growth could be fueled by its mobile maps app, but also by Google's YouTube on mobile devices, says Chowdhry.

Like Google Maps, YouTube had been a default app on iPhones but was booted off this year, only to return as an ad-enabled download app. Chowdhry estimates the YouTube app has been installed 30 million times since its September return.

"YouTube on the Web has an (annual ad) run rate of about $2 billion," said Chowdhry, "and in the next 12 to 18 months, you could have that much revenue capability, or even more, from the mobile app."

Facebook (FB) had the second-highest revenue from U.S. mobile ads in 2012, and that will rise 151% in 2013, eMarketer said. But Facebook's mobile ad revenue is still just a fraction of Google's.

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